The Best Life Insurance Contract In the World?

Imagine having a golden ticket that simply could not fail to make you money. It’s the stuff of dreams, but it is exactly what Max-Hervé George, a 25-year-old French investor, has in his possession. It was a gift from his father and could see the young millionaire become a billionaire in the next decade.

It sounds too good to be true. but Max-Hervé George and his family have a spectacular financial contract that provides 68% annual returns without any risk.

How? Essentially, the contract allows him to invest without having to worry about what will happen because it is as though he can see the future—and it is causing Aviva some big problems.

Known-Price Contracts

When Mr George was just seven years old, his father gave him this special life-insurance contract, and now, the George family are the owners of this contract. From an insurance point of view, it is the worst contract ever. But, for the family, it is a ticket to untold riches.

The contracts were issued in the 1990s. Known as ‘known-price’ contracts, they are incredibly generous and essentially allow the policyholders to switch investments by using the previous week’s closing prices. If Mr George’s investments perform poorly, it does not matter; he just switches them.

The contracts were issued by L’Abeille Vie, a French insurance company that does not exist anymore after it became Aviva more than a decade ago. Aviva wanted to change the terms of the contracts, but the French High Court and Supreme Court voted in favour of Mr George.

A Real Headache for Aviva

The contracts have a growth rate of 68%, meaning the value will go up enormously throughout the coming years. Mr George is not the only holder of one of these contracts. There are at least 30 other people in litigation against Aviva—and there could be many more contracts out there. In fact, if the contracts continue to increase in value, they could become worth billions and could even grow to become worth more than Aviva.

Clearly, this is a major headache for the insurer, and it could even damage the merger with Friends Life. However, Aviva France claims that its solvency will not be affected by the contract, and it says that it is unlikely the liabilities will rise into the billions of dollars.


Why Do the Contracts Exist?

L’Abeille Vie offered the contracts in 1987 to its richest clients, which is a decision the insurer now surely regrets.

Life insurance is popular in France as a savings product, but this is not a typical contract. When the contracts were issued, the prices for the funds were published on the Friday, and clients could switch funds at the prices before the next price was published. Essentially, this was a gift from the insurer to its richest clients.

Why? Perhaps it thought that, due to all the work involved, very few clients would bother to take advantage of the contracts. L’Abeille Vie was not the only insurer to issue such contracts, with Axa and another group that Allianz now owns all offering these special contracts to their rich customers.

However, three decades ago, prices for funds were published less frequently than today, and trades could take days to be processed, during which time the market could move.

During the 1990s, the danger of these hindsight terms became clearer, and customers were persuaded to amend them. Insurers even sometimes paid their customers to give them up.

Mr George’s father bought the contract in 1997 when it was still available, investing 50,000 francs. Shortly after, the insurer stopped selling them, and it sent its policyholders new documents to try and get them to change contracts. Most of them did sign up for the changeover, but not the George family.


How Much Will Mr George Make?

In 2005, about 30 holders of contracts had taken legal action against Aviva, and the George family won a court judgement in 2007, so the contracts were affirmed to be valid. Mr George is also investing more money in the contract. He secured a loan from a French bank recently and claims that the contract allows him to add as much as he wants.

It will be interesting to see where the case goes—and just how much value the contract can accumulate over the coming years. If it keeps increasing in value at the same rate, Mr George and his family could soon be very rich, indeed.

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